Asutosh Mookerjee and Rankin, JJ. -
is an appeal from an order made by Mr. Justice Greaves against a surety under S. 1, 5, Civil P. C. The facts material for the determination of the questions in controversy are really not in dispute and may be briefly stated.
On the 29th July 1920, a preliminary decree was made in a mortgage suit instituted by Howeson Brothers against the Harveys. On the same day, one of the defendants, W. S. G. Harvey, was appointed Receiver. On the 9th September 1920, the appellant, M. A. Mamooji, became surety for the Receiver. The surety bond stated as follows :
" If the said W. S. G. Harvey do and shall duly account for all sums of moneys which shall and have come into his hands as such Receiver as aforesaid and file all papers and his half-yearly accounts before a Judge of this Court, as directed by the said decree of the 29th July 1920, and do and shall duly and faithfully perform the duties as such Receiver as aforesaid, according to law, and in all respects discharge the duties and obligations which shall devolve upon him as such Receiver as aforesaid, and obey and carry out the said order and all other orders and directions which may hereafter be made and given by the said High Court in the said mortgaged properties, then and in such case the above written bond or obligation shall become void and be of no effect ; other wise the same will remain in full force and virtue."
On the 22nd July 1921, Mamooji made an application to be released from his obligations and covenants as stated in the security bond. This application was heard by Mr Justice Greaves on the 5th August 1921, but no order was made in favour of the petitioner. On the next day the solicitor for Mamooji wrote to the plaintiff and stated that as Harvey had not carried out his agreement with Mamooji, Mamooji did not wish to continue to guarantee the acts of Harvey in whom he could not any longer place confidence. Mamooji accordingly desired to be released from further liability. The letter, however, stated that Mamooji would hold himself under the bond al ready executed for all acts and omissions of Harvey till such date as he might be released from further acting by order of the Court which he would then seek to obtain. On the 10th August 1921, a similar letter was addressed by the solicitor to the plaintiff. The letter repeated that Mamooji did not wish to act any further as surety for Harvey and requested the plaintiff to apply to the Court for the removal of Harvey and for the appointment of the Court Receiver in his place. On the 2nd December 1921, the solicitors for the plaintiffs wrote to the solicitors for Mamooji with the result that on the 12th December 1921, Harvey was removed and Martell was appointed Receiver in his place. On the 19th May 1922, the Referee found that a sum of Rs. 32,806-14-3 was due from Harvey. On the 15th July 1922, an order was made by Mr. Justice Greaves on Harvey to pay this sum to Martell. Harvey was apparently unable to make the payment and on the 7th August 1922, an application was made to recover the sum from Mamooji. This application was dismissed on the 18th August 1922, as the bond which stood in the name of the Registrar had not been assigned to the Receiver. The assignment was effected on the 24th August 1922, and thereafter, the present application was made under S. 145, Civil P. C., on the 5th December 1922, to recover the sum from the surety. The position taken up by the surety was that he had effectively discharged himself by the notice he had given. This contention was overruled by Mr. Justice Greaves and an order was made against the surety in terms of S. 145, Civil P. C. In the present appeal, we have been invited to consider the propriety of this order.
On behalf of the surety, reliance was placed upon S. 130 of the Indian Contract Act and the decision in Rajnarain Mukherjee v. Phulcoomari Debi [1909] 29 Cal. 68 : 6 C. W. N. 7. This decision was doubted by the Madras High Court in Subrayya v. Ragammall [1905] 28 Mad. 161 : 14 M. L. J. 482, which was accepted by the Allahabad High Court as a correct exposition of the law in Kandhya Lal v. Manki [1909] 31 All. 56 : 6 A. L. J. 19 : (1908) A. W. N. 288. We are of opinion that the view taken by Mr. Justice Greaves is correct.
In Rajnarain v. Phulcoomari [1909] 29 Cal. 68 : 6 C. W. N. 7. it was ruled that S. 130 of the Indian Contract Act enabled a person who had become surety in an administration proceeding to discharge himself by suitable notice.
The judgment of Sir Francis Maclean, C. J. was cautiously phrased and does not support a more extended rule, although the language used by Mr. Justice Banerjee seems to go further. We are of opinion that notwithstanding S. 130, which holds that a continuing guarantee may at any time be revoked by the surety as, to , future transactions by notice to the creditor, it is not competent to the surety for a Receiver, who has been appointed an officer of the Court, to discharge himself merely by notice to the decree-holder, or other person at whose instance or for whose benefit the Receiver was appointed : O'Keefe v. Armstrong [1852] 2 Ir. Ch. R. 115.
A person does not become a surety till he has been accepted as such by the Court and we cannot hold on principle that he can discharge himself without the consent of the Court. Disastrous consequences may, indeed, result to the estate in charge of the Receiver, if the surety be held competent to relieve himself from the moment he has given notice to the person interested. It is worthy of remark that this extreme position was not at first taken up by the surety in the case before us; as already stated, he realized at quite an early stage of the proceedings that he could secure his discharge only with the consent of the Court. We need not in this view examine the decision in Subraya v. Ragammall [1905] 28 Mad. 161 : 14 M. L. J. 482, which is in harmony with Bai Somi v. Choksi [1895] 19 Bom. 245 and Kandhya Lal v. Manki [1909] 31 All. 56 : 6 A. L. J. 19 : (1908) A. W. N. 288 and is supported by the analogy of Re Stark 1 P. and D. 76. Calvert v. Gordon 7 B. and C. 809 : 3 M. and Ry. 124 : 7 L. J. (O. S.) K. B. 77 and Lloyds v. Harper 16 Ch. D. 290 : 50 L. J Ch. 140 : 43 L. T. 481 : 29 W. R. 452. The case last mentioned dees not assist the contention of the appellant that he was discharged from liability the moment he served notice upon the decree-holder. It may be conceded that a continuing guarantee, not under seal, for future advances or supplies, in consideration of the granting of such advances or supplies does not become binding until the person to whom it is given acts upon it, and may consequently be revoked before it is acted upon ; further, even if it has been acted upon, it may, if it contain no stipulation to the contrary, be revoked as to further transactions : Offord v. Dames 12 C. B. N. S. 748 : 31 L. J. C. P. 319 : 9 Jur. N. S. 22 : 6 L. T. 579 : 19 W. R. 758. Coulthart v. Clemenson 5 Q. B. D. 42 : 49 L. J. Q. B. 204 : 41 L. T. 798 : 28 W. R. 355 and Beckett v. Addyman 9 Q. B. D. 783 : 51 L. J. Q. B. 597. The question, however, remains whether when a surety has been accepted as such by the Court, he can free himself from liability without the consent of the Court. We are of opinion that the answer must be in the negative
The result is that the order made by Mr. Justice Greaves, which is obviously right on the merits, is confirmed and this appeal dismissed with costs.
Viscount Finlay. - In their Lord ships' consideration of this case they see no reason for differing from the Courts below
They will humbly advise His Majesty that this appeal should be dismissed with costs.
Appeal dismissed.